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Consider reselling that designer bag before you buy it

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Ourtrend examines the future of fashion and the circular economy with a focus on the circular economy.

The Hermes Mini Kelly is a symbol of the changing luxury market more than any other designer bag. This small, top-handle bag was first introduced in 1980. It measures just eight inches wide and can fit a smartphone. A leather version is available at Hermes stores for around $8,000. If you’re not Kylie Jenner (famous for her $1 million Hermes bag collection that includes a number of Mini Kellys), this is the price you’ll pay if a salesperson offers to sell you one. While the resale value is comparable to some luxury cars, it hovers around the same level as that of luxury cars. The Mini Kelly II, the newest version, was launched in 2016. Its average auction price at Sotheby’s was $29,000 in 2021. The alligator, lizard and ostrich versions sold for more.

This example will cause serious sticker shock to luxury shoppers, but the Mini Kelly is not an exception in the luxury retail sector. Brands like Hermes, Chanel and Louis Vuitton are seeing their preowned prices rise, with some reaching close to the retail price and others exceeding it.

Analysts at Jefferies claim that Chanel has increased the price of its iconic handbags by 71% on average since the pandemic. Prices have been increased by other brands, such as Saint Laurent and Bottega Veneta, but not as much.

This shift is fundamentally changing how women make luxury handbag purchases. It’s no longer about “Do I like it?” for many women. They now have to consider “How much this bag will resell for?” This means that they must weigh what brands, which colors, and what type of leather they choose.

Erica De Lima is a chemical engineer and a social media influencer via Instagram and TikTok. She’s well-known for her Instagram posts documenting luxury purchases. “My shopping habits were influenced by my loud and colorful personality. I used to love all the trendy bags.” She says she has moved on from trendy styles because they don’t have the same value.

Bottega Veneta, Gucci and other buzzy brands are two she says she may have purchased if she hadn’t thought about resale. She now gravitates towards classic styles that will be timeless. “The Lady Dior classic bag–I bought two of them knowing that they would be around for the long-term and still in style on the resale marketplace.”

She doesn’t regard her purchases as “forever” anymore. “I used to think that I would keep all the bags I purchased in my closet for ever. If I don’t like something or get bored with it, I sell it.”

Patty Perreira is the cofounder and designer at Barton Perreira and a long-time fashion collector. She says that she does not buy eyewear with the intention to resell it, but the possibility is always there in her head. (And she did a closet clear-out, selling 140 items a few years back). It’s crazy to think that some bags can cost as much as a car. It’s easier to accept some of these prices when you can see that one bag is valued at $10,000 and another bag is valued at $35,000 on resale websites.

Perreira now weighs which brands she prefers. Hermes is the obvious choice–that’s almost like a 401k contribution. Chanel is also worth its value. “Even the shoes sometimes have more value than Chanel,” she said. “Some items are so rare in retail that some people just buy them and decide later if it’s worth reselling on The Real Real.”

This belief is gaining popularity among luxury shoppers. Elizabeth Trongone Layne (chief marketing officer at Rebag luxury resale website) tells Glamour that customers are better informed about luxury investment classes than ever. Resale has brought transparency to the market. After making a purchase, people are more aware of the true value of an item. This is changing the way they shop.

Layne shared that customers even consider resale when choosing color. “Black, Tan, and Darker Blue tend to increase their value the most,” Layne said.

Although it’s hard to determine exactly when luxury resale became a market for collectibles, the pandemic was a significant turning point. While women were criticized for buying sweatpants and athleisure in the midst of COVID lockdowns in 2019, luxury handbag sales quietly rose. Due to the lack of brick-and-mortar stores and the limited presence of luxury brands such as Chanel and Hermes on e-commerce, resale and auctions have been the only means to buy many luxury bags in certain times over the past two years.

The pandemic has made it more difficult to purchase luxury bags from retailers due to consumer demand and production problems. This has driven people to the resale marketplace. Morgane Halimi, Sotheby’s head of accessories and handbags, told us that it’s almost impossible to go to Hermes and buy a bag–a Birkin, or a Kelly—-it’s just about impossible right this moment. “Brands also have had supply chain problems.”

The stage was set for luxury retail to explode into the stratosphere. According to Sotheby’s, handbag sales at Sotheby’s increased more than 4.5x year-over-year in 2021 compared with 2020. Forbes reports that Luxury resale site Fashionphile saw a 107% increase in sales between 2020 and 2021. According to Rebag, sales grew by 50% in 2020, and another 70% in 2021 according to the company.

The luxury resale marketplace is not the only one that’s growing. It’s also the market’s prices. Sotheby’s’ luxury division saw 63% of its lots sell for more than their high estimates. This is a 40% increase over 2020. In 2021, the average selling price of items was 66% higher than in 2020.

There are no longer days when shopping for a designer bag used was cheaper. For example, you can find Louis Vuitton Neverfull bags at prices up to $2,000 on the Rebag website. This is a significant discount from its retail price.

Rebag uses Clair AI technology to price its products. This instantly determines the bag’s resale worth by using machine learning and millions upon millions of images. Glamour is told by Layne from Rebag that the Neverfull bag’s high price may be due to supply chain problems, making it hard for customers to find it at Louis Vuitton stores.

Lily Shabani, a luxury YouTuber, points out that the quality problems luxury brands have had in recent years is another reason for interest in the resale marketplace and driving prices higher. “Some people prefer older Chanel bags from 2018-2019. You can see a difference in the quality.”

She says that older bags can be a good investment. A green Chanel camera bag with 24K Gold-plated hardware is one of Shabani’s favourite finds from resale. This is something the brand no longer makes. She says, “Buying that bag made me rethink how I think about resale.”

It’s not surprising that there are many online forums and Facebook groups dedicated to the discussion of the luxury bag resale market. The Facebook group Hermes Addicts–Reetzy Community & Marketplace can be as niche as the discussion about which Hermes leather bags have the highest resale values (Barenia seems to be the preferred choice). YouTuber Shea Whitney’s “15 Best Designer Handbags Worth the Investment!” video has nearly 1.3 million views. There are thousands of comments on PurseForum discussions about the resale price.

All of this raises the question: Is there a resale bubble here? This could risk turning shoppers away. How much do you pay for a bag?

Regina Valdes is a New York City lawyer and long-time Chanel and Hermes customer. She says that the sticker shock she has experienced from both the retail and resale market is beginning to show. “The price rises from Chanel and Hermes, as well as the big fashion houses, and the prices on gray market have made me think, maybe I’ve crossed my threshold. This is the first time in my buying career. It is still on her wishlist to spend $10,000 on a Chanel Classic Flap bag. A Chanel Classic Flap in emerald green from 2018–selling on the resale marketplace for $20,000. She says, “I can’t bear to do that.”

De Lima states that luxury is becoming less affordable and that resale is now difficult for entry-level purchase. “Sometimes I see bags for $200 less in a resale store than they do in the store. I feel that they are taking advantage of supply chain problems.”

Sotheby’s Halimi states that although resale prices are increasing in recent years, they have been on a steady trajectory for quite some time. Therefore, shoppers should consider this to be the new normal. Although some might be surprised by the current prices, a look back to five years ago shows a fairly stable trend. This market has been steadily growing for quite some time. This is the definition and function of demand. If it weren’t for the fair market price, demand wouldn’t exist.

What is the De Lima’s advice for luxury shoppers in all this chaos? Find a balance between what you love and what has resale potential. I used to impulse shop thinking nothing about resale value, but it has come back to bite me a few times. Fashion is supposed to make your heart sing. Find your sweet spot between them.

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